The Basics Of Homeowners Insurance

Your home and the things in it generally represent the largest asset your family
will ever have. For this reason it is very important to have your home and its
contents insured at all times. One should have insurance on its contents, against
theft, fire, windstorm, or some other disaster. It is also wise to be insured
for personal liability. This would cover an accident that might occur to someone
who is visiting your home.

What's Included

A standard policy provides limited protection against (for example) fire and
theft. Broader coverage gives you insurance for additional losses except those
that are excluded from the policy. You can also get special insurance for such
items as jewelry, artwork and collectibles. You pay a separate premium for things
of this type.

What's Excluded

No basic policy covers losses resulting from war, riots, police actions, nuclear
explosion, or "acts of God." You can sometimes get an endorsement
to your policy to cover situations that are normally excluded, such as floods
and earthquakes, but it will be expensive.

What's Liability Coverage?

Liability coverage protects you if you are sued for causing property damage
or injuring someone.

What's a Deductible?

This is the amount you pay for a loss before the coverage kicks in. Deductible
amounts vary. Your insurance costs less if you take a larger deductible, but,
of course, you will have to pay the amount of any loss up to the deductible.

How Much Insurance Should You Buy?

Insure your house for at least 80% of its replacement value, but most financial
planners recommend that you insure your house for its full replacement value,
and perhaps the replacement value of the contents of your home. Carefully read
the terms of the policy so there will be no surprises in the event of a loss.

Caution...

When buying a home, if your down payment is less than 20% of the purchase price,
you will probably be required to purchase mortgage insurance. Do not pay it
as part of your mortgage, pay it separately. End it when your equity reaches
20% of the home's value. Mortgage insurance benefits the mortgage lender, not
the individual.

Material discussed is meant for general illustration and/or informational purposes
only and it is not to be construed as tax, legal, or investment advice. Although
the information has been gathered from sources believed to be reliable, please
note that individual situations can vary therefore, the information should be
relied upon when coordinated with individual professional advice.

This web site may contain concepts that have legal, accounting and tax implications. It is not intended to provide legal, accounting or tax advice. You may wish to consult a competent attorney, tax advisor, or accountant.